Personal loans are unsecured loans and are expensive. So, avoid these high interest rate loans unless absolutely necessary.
However, without any collateral securing a personal loan is a difficult task as many eligibility conditions must be met to obtain a sanctioned loan.
“An instant loan helps individuals meet their financial needs. Such a loan is useful if you have unexpected expenses to settle, especially in the short or medium term,” says Rohit Garg, CEO and co-founder of SmartCoin.
Garg lists the following 5 tips to improve your chances of getting that loan application approved:
1, Lower your debt to income ratio
Be sure to pay off your existing debts and credit card bills to reduce your debt-to-equity ratio before applying for a personal loan. Preferably, the total amount of EMIs you are required to pay each month should not exceed 30-40% of your monthly income.
2. Improve your CIBIL score
You must also have a commendable CIBIL score for any instant loan application to be sanctioned. A credit score is a 3-digit number that reflects your creditworthiness with the lender and helps assess your risk of default. It highlights how you have managed your finances and bills in the past. The lower the score, the more chances you have of earning a lot on your loan application and vice versa. Most lenders in the country depend on the CIBIL score, which ranges between 300 and 900. A credit score above 725 is considered a desirable score.
3. Include all sources of income
Lenders like to see an applicant’s total income to gauge their ability to repay. Therefore, when filling the online loan application form, it is recommended to include not only your regular salary but also additional sources of income such as rental income, part-time income, etc.
4. Don’t apply for multiple loans at once
If you apply for many loans at once, all lenders are likely to launch several serious inquiries into your credit file. This will automatically reduce your credit score. Since you may appear to be an insatiable borrower, your loan application may also be rejected. Therefore, it is best to apply for the one that best suits your needs and personal loan eligibility after comparing all available options.
5. Select a lender with eligibility criteria you can meet
Check the different eligibility requirements of different lenders and choose the one whose eligibility criteria you can meet, instead of applying to multiple lenders simultaneously only to learn that you are not eligible for all of them.